Saturday, May 22, 2010

What Is Life Insurance Underwriting?

A life insurance policy is a legal contract between you and an insurance company. If you die while coverage is still in force, the insurance company is obligated to pay your beneficiaries a predefined sum of money based on the provisions of your agreement.

It is not surprising that carriers will go to great lengths to evaluate you before committing to providing you with coverage. The process that insurance companies take to determine the level of financial risk you pose is generically referred to as “underwriting.”

Many factors are considered and evaluated during the underwriting process, which varies from one company to the next, as well as with different policy types and coverage amounts.

Current Health Status

Your present health status is of primary importance to life insurance underwriters, as it is a clear initial indicator of your natural life expectancy.

Multiple medical questions must be answered during the application phase, usually followed by a brief physical exam that includes acquiring blood and urine samples for laboratory testing. Your fluids are sent to an independent medical lab and tested for the presence of various substances and element levels, the results of which are considered by underwriters.

Previous Medical History

In addition to your current medical status, your previous health history is essential to forming a complete risk profile. Treatment you received in the past for various conditions is considered by underwriters and added to your profile.

Certain conditions and treatments, regardless of whether those ailments still exist, can be a cause for concern to underwriters; they may indicate the potential future occurrence of other life-shortening maladies.

Driving Record

Insurance carrier underwriters obtain a copy of your driving record and motor vehicle abstract. The presence of moving violations, at-fault accidents and DUI tickets are a major cause for concern. Driving itself can be dangerous, and if your driving record indicates a pattern of risky behavior, the underwriting results will reflect the carrier’s evaluation and concern.

Occupational Analysis

Your job is considered in life insurance underwriting, and will play a roll in determining your monthly premium. If you are employed in a position that puts you at an increased risk of death, as compared to the average individual, the insurance company will require larger payments to offset this additional financial liability and exposure.

Hobbies and Habits

Life-threatening hobbies, including skydiving, hang gliding, spelunking, drag racing, bungee jumping and similar activities that present a clear threat to physical safety will be considered as part of life insurance underwriting.

Your involvement in dangerous activities will result in an increased life insurance premium that is proportionate to the carrier’s concern over this increased risk to your life.

Family Medical History

The fact that many debilitating medical conditions are hereditary is the reason life insurance underwriters examine and evaluate your family’s medical status. Life insurance underwriting typically only considers the health history of your immediate blood relatives such as mother, father and siblings.

If you inform the carrier that one of these relatives died from, or was diagnosed with, conditions such as heart attacks, strokes, cancer or another potential genetic predisposition, your premium payment will be increased proportionately with the company’s level of concern.

Criminal Background Check

Life insurance underwriting includes a criminal background check. Carriers reference actuarial statistics indicating a correlation between felony convictions and shorter life spans. Recidivism rates for specific offenses are also factored into the underwriting, with premium increases typically being related to the types of crimes committed.


New York Life: Understanding Underwriting
Life Insurance Underwriting Guide: Underwriting Factors
Insure: How Life Insurance Companies View You

This article is a Twisted Nonsense Exclusive! (05/22/2010)

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